You may think that Pizza Hut’s Half-Price Pie All Week deal is a really good one – until your personal industry insider (me) points out why that may not be the case, after all. Do you really believe they could afford to give away hundreds of thousands of Pizzas at a loss? I don’t. And here’s how they get around bankruptcy…
How do they do this without going bankrupt?
The Hut is offering half-Price Pizza until January 8. That sounds great, and, if you like Pizza Hut Pizza, I guess ii is. My question is, “How great?”
As a food service industry veteran, I can tell you, profit margins are slim – particularly in the Fast Food sector, where operators rely on constant volume to make their money. Profit margins can be as slim as 5-10 percent on food items which only make sense on your menu if you sell tens of thousands of them a month. In the real world, if your food cost on a dish is more than 30 percent, you’re automatically losing money on it after you’ve paid all your bills.
The old beverage dodge…
We’ll set aside the hairy old issue of how restaurants – especially chain take-outs, mint money from the spouts of their coffee carafes and soft drink dispensers. That’s a separate and amazing story that deserves its own telling. And I’ll give it one soon, in this space.
Why Pizza is cheap to make and half-price Pizza is even cheaper…
Pizza is traditionally Flatbread with toppings. I say it that way to emphasize that classic Pizza is a street food consisting mainly of bread with a brushing, dusting and/or scattering of toppings to add flavour and colour.
The Pizzas we eat for full meals today are far-evolved from the street food crusts that Neapolitan Tomato and Cheese fans first gnawed upon three hundred years ago. We’ve made the toppings the star and the crust is just there to give us a way to hold onto them. Therein lies the secret… Crust v.s. Toppings.
Pizza Hut’s Crust policies…
I have noted with interest over the past few years, how Pizza Hut manages to roll out it’s Pie and Garlic Bread specials and not go out of business. And it you take a good look at the posters and commercials and Pizza Posters, you’ll see what I mean.
Believe it or not, it costs less than a quarter for Pizza Hut to make a standard medium Pizza Crust or a tray of it’s fancy garlic bread. Add Pizza Toppings and the total cost of ingredients to the Hut Operator is probably around $3. Which is just about right, since you pay around $10 for the finished Pie.
Why make such a big deal about additional Pizzas at just $5-$5-$5? Because the store is still making a couple of bucks on each of those ‘Extra’ Pies.
Why so proudly offer Bread Trays for cheap? They’re just 50 cents or so of dough with a token coating of toppings. Cost: under a buck.
Why make such a bid deal about ‘Deep Dish’ selections?” They’re not really Deep Dish. They’re thick crusts with the usual toppings baked in a neat-looking Deep Pan.
So, there you have it…
There’s an old line you often hear characters mention just before their untimely deaths: “I get out of the War in one piece, I tell ya, Lenny, I’m gonna open a bar. What a racket!”
I say: “If you have the wherewithal to acquire a Fast Food Pizza Franchise, do it. You can only make money hand over fist if you follow the rules…”
~ Maggie J.